JUNIOR MINING
JUNIOR MINING IN SOUTH AFRICA Making the right moves By Nelendhre Moodley
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he junior mining sector is vital to the overall health of the South African mining industry, especially in keeping it alive and growing. To unpack some of the latest developments under way in the junior mining sector, SA Mining recently caught up with Grant Mitchell: head of the Junior and Emerging Miners’ Desk at the Minerals Council South Africa.
HOW IMPORTANT IS JUNIOR MINING IN SOUTH AFRICA?
Junior miners comprise of explorers, developers and smaller producers. Exploration companies are essential to the long-term survival of the South African mining sector. Without finding new deposits a mining economy cannot survive in the longer term. Unfortunately this part of the mining value chain has been neglected in South Africa. Currently South Africa’s exploration budget decreased from $404-million in 2007 to considerably less than $100m in 2018 and South Africa’s share of global exploration budgets has decreased to about 1% in 2018. The state needs to support a high-risk activity such as exploration, which largely relies on venture capital markets, by providing incentives for investment.
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The second group under the junior mining category in South Africa are developers who take a known deposit and build the mine with a view to moving on into production. Interestingly, the research done at the Minerals Council on the junior mining sector shows that most junior mining companies in South Africa who are explorers and developers wish to become established as miners in the long term. This is unlike the junior mining sector in Australia and Canada for example, where exploration companies specialise in exploration alone and if they find a deposit, they sell it on to a mining company which then develops the mine. The third category of junior miners in South Africa consists of smaller and midtier producers who typically buy a small operation with the intention of mining. The Minerals Council defines these producers as having an annual turnover of below R500m per annum. They are found in most mineral commodities – coal, gold, platinum, manganese, chrome and diamonds as examples. The biggest concentration is in coal with many being wholly owned and managed BEE companies.
HOW HAS 2020 TREATED JUNIOR MINERS AND HOW HAVE THEY MANAGED THE PANDEMIC?
2020 has been a difficult year for the junior mining sector. The lockdown earlier on in the year presented junior mining companies with many challenges. A Mentimeter snap online survey conducted under level 3 lockdown with a sample of junior Minerals Council member companies showed that initially testing and screening was a challenge; however this improved as the lockdown continued as more test kits became available. Most of the companies surveyed felt the regulations around COVID-19 were manageable and achievable, however once mining production resumed many had to scale back production due to lack of demand in the markets as well as the inability to raise funding to maintain full production capacity. Exploration and development projects were particularly hard hit, with most of these projects either suspended or at least reduced in scale. In terms of producing companies, most of them had to materially defer construction and development projects under level 3, with many companies having to suspend contractors by evoking force majeure. In terms of mining right applications,
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SA’s exploration budget decreased from $404-million in 2007 to less than $100m in 2018. – Mitchell
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SA MINING
JANUARY / FEBRUARY 2021
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